4 Reasons Your Business May Need to "Rightsize"

Published Mar 17, 2015 at 2:03 PM

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Whether U.S. businesses are still on a staffing pause due to the recession, or feeling optimistic about the economy, there is a new trend reshaping office markets across the country-- rightsizing.

While this term doesn’t always imply a decrease in space, that has certainly been the case with most businesses, especially law firms.

A recent report from Chicago-based real estate services firm JLL found that law firms, on average, shed 17 percent of their space upon relocating in 2014 – up from 14 percent in 2013 – with many moving administrative functions off-site and, in some cases, adopting open-office floor plans that allow them to further reduce their real estate expenses.

While this trend has most commonly been associated with the legal sector, other industries have adopted a similar strategy as they seek to maximize efficiency and facilitate collaboration in the workplace.

Although each company’s circumstances are unique, most rightsizing moves are made for one of the following reasons:

1. They overleased (or underleased): When a business is just getting off the ground, it can be difficult to determine how much space to lease due in part to a lack of historical data. Therefore, companies need to find that sweet spot between too much and too little space, both of which could hamper growth. If a business rushes through the leasing process or simply doesn’t grow as planned, rightsizing allows them to correct the situation. Sometimes this means leasing more space, not less.

2. They want a more collaborative floor plan: Fully open floor plans can create challenges for any business, especially lawyers, accountants and other professionals that require a certain level of privacy for their day-to-day operations, but a growing number of businesses are warming to non-traditional office configurations that offer a mix of private and collaborative workspaces. This hybrid model offers the same benefits as an open coworking space without sacrificing employee privacy. Employers are able to reduce their square footage, and their rent, without having to group employees together in one giant room.

3. They want Class A space in a Class A location: As noted in the JLL report, law firms have historically gravitated to central business districts where clients, public transportation and other urban amenities are easily accessible. That may be changing as they and other employers seek out young talent in “fringe CBD” areas, but most businesses still want an office at Main and Main. Because space in the best buildings isn’t cheap, businesses may need to give up square footage so they can afford an office that, while smaller, is better suited to their needs.

4. They’ve gone digital: The adoption of cloud-based file storage has rendered most file cabinets and storage rooms obsolete, leaving tenants with excess space. Many established businesses have updated their technology, but that doesn’t always carry over to their lease. In some cases, businesses are paying for the amount of space they needed five or 10 years ago when, in reality, that number should be much lower.

While the circumstances for rightsizing vary, the outcome is the same. In the end, it all comes back to cost. By taking a close look at their operations, companies can take the guesswork out of leasing and ensure they’re paying only for the space they need, making it easier to rein in expenses over the long term.

Frank Chalupa is president and co-founder of Amata Office Solutions, a Chicago-based real estate provider specializing in office solutions for companies requiring up to 10,000 square feet of office space. For more information, visit www.amatacorp.com.